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BP Assessing Restart of Largest Refinery in the Midwest // Norway's Angry Neighbors // The Gas and Light Casino

BP Assessing Restart of Largest Refinery in the Midwest

BP is looking to restart its Whiting refinery in Indiana, which was downed by an electrical fire several days ago.

The refinery is the largest in the Midwest and cranks out 440,000 barrels of crude per day. It sits in a region--PADD 2--that is currently running at 95.4% capacity since August 19.

"The Whiting refinery can produce 10 million gallons (~277,000 barrels) of gasoline, 4 million gallons of diesel, and 2 million gallons of jet fuel each day; it is capable of producing enough gasoline every day to support the daily travel of 7 million cars, the refinery factsheet claims," reports Oilprice.com.

While gasoline prices have been slumping downward over the last couple of months, an outage like this has the potential to pressure them back up. BP did not offer any specifics as far as how much product was affected by the electrical fire or a possible restart date.

Norway's Angry Neighbors

Norway plans to curb electricity exports to the rest of Europe due to its flagging hydropower. Its neighbors aren't happy.

"Under political pressure from high local electricity prices despite abundant hydropower resources," reports the Financial Times, "Norway’s centre-left government decided on Monday to prioritise refilling its reservoirs when their water levels are below seasonal averages."

The country is one of Europe's largest electricity suppliers, selling kilowatts to the UK, Denmark, Germany, and the Netherlands.

“The government will ensure that we have arrangements that prioritize the filling of our hydropower reservoirs and the security of supply for electricity, and limit exports when the water level in the reservoirs falls to very low levels,” Terje Aasland, Norway’s oil and energy minister, said.

Norway's neighbors believe the country is betraying Europe and helping Putin. Some also worry that it will create an outbreak of countries exiting the market and looking out for themselves.

“There is a danger in any national measure in any situation like this — they are contagious. People might say if Norway can do it, so can we. Therefore I think it’s the wrong approach,” Johannes Bruun, director for the electricity market at Energinet, Denmark’s grid operator, told FT.

The situation underscores the tensions the energy crisis and the Ukraine war have enervated. Countries will pursue their own interests and there is no reason to sacrifice their economic well-being for others. How could any country, let alone a democracy in which the citizenry serves as sovereign, justify domestic rationing while exporting needed supply?

"Leaving aside the playground argument of 'If you put your own interests first you help Putin,'" said Irina Slav, "how wise is it to alienate Europe's #2 gas supplier right now?"

The Gas and Light Casino

What are the results of deregulating natural gas and electricity utilities in America? Right now, not good. A new piece from Bloomberg argues that it has turned consumers into energy traders, a forced side-hustle no one seems to be enjoying.

Eye-watering energy prices have sent utility bills into the stratosphere for many Americans. But why does it inspire customers to eye the market like hawks?

"That’s because under so-called customer-choice programs that predominate in these states, consumers have the option to go with a variable rate of electric, oil or natural gas — usually the priciest option — or lock in a fixed rate that comes with a term ranging from six months to as many as five years," reports Bloomberg.

If you choose wrong, it could cost you hundreds. While Americans aren't suffering as much as their European and British counterparts, 1 in 6 households are behind on their utility bills. Many are facing shut-offs.

Part of how America arrived here stems from the dynamics of electricity restructuring in the nineties. As more of the country moved into so-called deregulated electricity markets, smaller generators could move into the market to compete against utilities. Often these were natural gas plants, especially after the shale boom, and heavily subsidized renewables. Gas can show up just in time to back up intermittent renewables. This has made natural gas the guarantor of reliability for huge swaths of the country.

This worked when natural gas was cheap. But now? "Since natural gas is the No. 1 driver of electricity rates, the result has been a sticker shock, making for thorny decisions come contract renewal time," reports Bloomberg. Customers have now turned into natural gas forecasters looking for the best deal.

The question is whether we see this as a victory of the "ultimate freedom"--choice--or an invasion of our precious time and money. That will depend on whether or not the system can keep the lights on. And if the house always wins.

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Conversation Starters

  1. Household energy bills in the UK are set to triple. "British energy market regulator Ofgem announced an 80-percent hike in the energy price cap aimed at shielding consumers from price swings, promising to plunge millions more into energy poverty," reports Oilprice.com.

  2. Canada's taking another look at developing LNG export terminals on its West Coast. Rather than focusing on behemoths like last time, the country's considering smaller terminals that will be easier to complete. Developers are looking to cultivate positive relationships with indigenous tribes ahead of time lest land disputes stymy their efforts.

  3. Which Asian countries are buying Russian crude and which are steadfast in their sanctions? S&P Global has just published this infographic to lay out the playing field.

Crom's Blessing